Intersil won't let go of 802.11 business, says CEO
By Anthony Cataldo
EE Times
February 3, 2003 (8:58 p.m. EST)
San Francisco, Calif.- Intersil Corp.'s president and chief executive officer Rich Byer today dismissed suggestions that his company would be better off unloading its wireless LAN chip business and focus solely on analog components.
Intersil's high-end analog components, such as power management ICs and switch regulators, continue to grow and fetch highest gross margins of all its product groups while sales of its 802.11 chipsets fell 25 percent last quarter. The company has blamed the slowdown on excess inventory in its distribution channels that caused customers to cancel orders.
Speaking at a Thomas Weisel Partners technology conference today (Monday, Feb. 3), Byer said the company is also facing more competition than before. But he said he's optimistic about the growth potential for 802.11 chipsets and that wireless LAN products are part of Intersil's corporate identity.
"Today investors look at us as a company that has a very powerful analog business and a very powerful wireless LAN business," Byer said.
Intersil generated more than $56 million in revenue from 802.11 chipsets last quarter, more than any other product group. Byer said he expects Intersil, which has a 60 percent share of the market today, to remain the industry's top 802.11 chipset vendor in 2003.
Even so, Thomas Weisel analyst Eric Gomberg asked Byer if it would be better for Intersil to sell or spin-off its wireless LAN business. Despite seeing its net revenues rise 23 percent last year to $706 million, Intersil's stock has fallen from near $40 last January to the mid-teens more recently. "It seems investors are not recognizing [Intersil's] value in the wireless LAN business," Gomberg said.
But Byer defended the company's stake in wireless LAN, saying it makes Intersil a more balanced and valued semiconductor supplier. "We think that wireless LAN gives us growth; it does contribute to earnings per share and the growth of the corporation. And we think the blend of [analog and wireless LAN] makes us a more important supplier to companies like Dell, like a Cisco, like a Sony, like a Samsung, like a Philips et cetera," he said.
Byer acknowledged that the company is facing increased competition from companies fielding functionally-identitcal 802.11 chipsets, and that pressure on gross margins "is absolutely happening on the [802.11b] side of the equation."
One looming competitor is Intel Corp., which intends come out with a 802.11 module this year that will work with its Banias notebook processor. Byers said Intel's entrance into the Wi-Fi market will "create a great opportunity to expand [the 802.11 business] much more significantly."
The wireless LAN market grew more than analysts predicted last year, and will double in size this year to about 40 million chipsets, Byer said.
Moreover, the wireless LAN space is still ripe for innovation, he said. By the second half of 2003, Intersil should derive more than half of its wireless LAN revenue from chipsets used in dual-mode radios and higher-speed 802.11g applications. "The higher end [applications] are going to command premiums and therefore higher gross margins," Byer said.
Looking forward, wireless LAN systems will be embedded into applications like LCDs, TVs and DVD recorders, which will need Wi-Fi chipsets designed with better security and quality of service features, Byers said.
"It's not just going to be a wireless data solution; it's in fact going to be a conduit for broader applications," he said.
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